By Noelle McCall, CIC, CRM, CCIP, ACRA, CISR

Did you know that the standard ISO commercial auto coverage form CA 00 01 (edition dates of 1990 and newer) includes three coverages that are often required in contracts today? 

Additional Insured

The CA 00 01 form provides limited additional insured coverage for anyone liable for the conduct of an "insured" in the policy but only to the extent of that liability. Coverage applies on a limited basis for the additional insured’s vicarious liability. “Vicarious liability” means that the additional insured is not covered for their own direct liability or negligence. Also, coverage provided by this form does not depend on a contract requiring additional insured coverage.

Pro Tip! - The ISO Designated Insured Endorsement (CA 20 48) in essence provides the same level of additional insured coverage found in CA 00 01, so you don't actually need the endorsement. ISO CA 20 48 is often used to allows insureds an easy way to provide a specific endorsement showing required additional insured coverage rather than providing a copy of the CA 00 01 coverage form pages. Certificate of insurance requests often ask for specific additional insured endorsements.

Primary and Non-contributory

Primary and non-contributory coverage has to do with how liability coverage may apply for additional insureds.

“Primary” means that the insurance of the named insured (i.e. the party who is required to provide coverage for the additional insured) is required to pay first (i.e. apply on a primary basis) before the additional insured’s liability insurance is required to pay.

“Non-contributory” means the additional insured’s insurance is not required to pay (i.e. not required to contribute).   

For commercial auto policies, the CA 00 01 form may provide primary coverage for covered autos the contractor owns as well as for liability assumed under an "insured contract". If an “insured contract” (as defined in the policy) requires that additional insured coverage apply on a primary basis, then the CA 00 01 form meets that requirement. 

If primary and non-contributory coverage is needed, then a separate endorsement would need to be added, such as the ISO CA 04 49–Primary and Noncontributory – Other Insurance Condition (11 16 Edition).

When the ISO CA 04 49 form is added, the policy to which it is attached is considered to be primary and the insurer will not seek contribution from other insurance available to an insured who is the named insured on that other insurance. Note - coverage under this endorsement only applies if required by contract or agreement.

Severability of Interests / Separation of Insureds

Severability of interests is a policy provision specifying that, except with regards to policy limits, insurance applies to each insured as though a separate policy were issued to each. This is important for two reasons: 1. even if there is no coverage for the named insured, there may still be coverage for the additional insureds, and 2. this coverage allows the policy to cover a claim brought by one insured (such as an additional insured) against another insured (such as a named insured).

The latest ISO CA 00 01 coverage form (11/20 edition) includes coverage for severability of interests, which is also known as separation of insureds. The form wording is listed below.

“Except with respect to the Limit of Insurance, the coverage afforded applies separately to each insured who is seeking coverage or against whom a claim or "suit" is brought.”

Pro Tip! – make sure you check the policy for any cross-suit exclusions as those can remove coverage for suits brought by insureds or additional insureds against another insured or named insured.  

Waiver of Subrogation

A waiver of subrogation is when an insurer agrees not to subrogate against a liable third party after the insurer has paid a loss on behalf of its insured.

The CA 00 01 coverage form includes the following wording with respect to waiver of subrogation. 

"Transfer of Rights of Recovery Against Others to Us

If any person or organization to or for whom we make payment under this coverage form has rights to recover damages from another, those rights are transferred to us. That person or organization must do everything necessary to secure our rights and must do nothing after "accident" or "loss" to impair them." 

The implication of this wording, which courts have supported, is that the insured may agree to waive their rights to recover against another party in a contract or agreement provided the contract or agreement is entered into before the loss has taken place. This means that, in most cases, insureds can grant waivers of subrogation for auto claims without voiding their insurance coverage, provided the waiver is executed prior to the loss. 

Some endorsements can also add this coverage. The Waiver of Transfer of Rights of Recovery Against Others to Us (Waiver of Subrogation) (CA 04 44 10 13) endorsement can be used to provide a specific waiver of subrogation with regards to scheduled parties. The Waiver of Transfer of Recovery Against Others to Us (Waiver of Subrogation)—Automatic When Required by Written Contract or Agreement (CA 04 43 12 23) endorsement provides an automatic waiver of subrogation if required by written contract executed prior to loss.

Pro Tip! - even though the coverage form CA 00 01 already implicitly permits waiver of subrogation before loss, either of these two endorsements may be useful if the insured's contract requires a specific waiver of subrogation endorsement be provided or if a different coverage form is included on the policy. 

Contractual Liability

Contractual liability is liability imposed on an entity by the terms of a contract.

Pro Tip! - contractual liability coverage and additional insured coverage are very important coverages to require in contracts because these are the two main ways that liability insurance can help support indemnity obligations in contracts. 

Contractual liability coverage is provided under the CA 00 01 coverage form (for commercial auto policies) in a way that is similar to contractual liability coverage under the CG 00 01 coverage form (for commercial general liability policies). Both policies provide coverage if the liability would have existed in the absence of a contract as well as for liability assumed in an "Insured Contract." The definition of "Insured Contract" is the same on both policies except for a few differences. The CA 00 01 definition of "insured contract" has an additional category for indemnity obligations in a car rental agreement, while the CG 00 01 definition of insured contract includes an elevator maintenance agreement. 

The following are included in the definition of "Insured Contracts" under CA 00 01:

• Leases of premises
• Sidetrack agreements
• Easement or license agreements
• Obligations under an ordinance to indemnify a municipality
• Indemnification agreements in contracts pertaining to the named insured's business
• Business-related car rental or lease agreements

The following are not included as "Insured Contracts" under CA 00 01:

• An obligation to indemnify the lessor of an auto for damage to the vehicle
• Contracts or agreement for the rental, lease, or loan of an auto to the insured that include a driver
• An obligation to indemnify a railroad for damages arising out of demolition or construction operations within 50 feet of any railroad property
  • Pro Tip! - Coverage for Certain Operations In Connection With Railroads (ISO CA 20 70) endorsement can be used to add back contractual liability for railroads.
• An obligation to indemnify a common carrier that transports property for a fee

Summary

When considering what endorsements may be needed to meet auto liability insurance requirements in contracts, don't forget that some coverage may be provided under the main ISO Commercial Auto coverage form CA 00 01. This is why requiring commercial auto liability coverage which includes the ISO CA 00 01 coverage form is a best practice.  

DISCLAIMER: Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions; and state jurisdiction. These instructional materials provided by Contract Risk Academy ("CRA") are intended as a general guideline and any interpretations provided by the instructor or the creator(s) of these materials do not modify or revise insurance policy language. In providing these materials, the authors assume neither liability nor responsibility to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional materials provided. Any statements concerning legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as legal advice, for which you should consult your own professional legal advisors. 

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